Many problems remain–chiefly high and persistent unemployment and stagnant wages. For the next generation of growth, we must focus on training and retraining workers, break the immigration deadlock, build out our infrastructure and invest in science and technology. We also need reforms that will make our entitlement programs affordable as we age. If Washington could do just a few of these things, imagine what the American economy might look like then.The debate over the sequester – the forced budget cuts that went into effect Friday – seems to have generated a lot of heat, but little light. So I have been studying the issue to try to fully understand what is going on.

The first question: how big are these cuts? Although they are not draconian, they are still significant. Why? For a start, you will have to find a year’s worth of savings in about seven or eight months, since that’s all that’s left of the year. But the big problem is that there are large parts of the budget that are either effectively exempt or where there are limits to how much can be cut. This means that the remaining parts of the budget are facing significant shrinkage.

It’s important to remember when thinking about government spending it has to rise every year even with no additional functions. The American population is growing, plus there is inflation of around 2 percent these days. There is room for discussion on how exactly factors like inflation should be evaluated, but some increase in spending is necessary if we are just to stay even. Of course, there are areas that should actually be cut or eliminated. But politicians rarely specify those and the truth is, the big money is in all the popular middle class programs (social security, Medicare, interest deduction, local tax deduction), most of which actually have relatively little waste and abuse in them.